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Nightly Business Report

News/Business. (2012) New. (CC) (Stereo)

NETWORK
PBS

DURATION
00:30:00

RATING
G

SCANNED IN
San Francisco, CA, USA

SOURCE
Comcast Cable

TUNER
Channel 80 (561 MHz)

VIDEO CODEC
mpeg2video

AUDIO CODEC
ac3

PIXEL WIDTH
528

PIXEL HEIGHT
480

TOPIC FREQUENCY

Lepore 5, U.s. 5, America 4, Us 4, Apple 4, Nanette Lepore 4, S&p 3, Erika Miller 3, 3m 2, New York 2, Bob 2, Mr. Bernanke 2, United Healthcare 2, Kraft 2, Zimmerman 2, Randall 2, Ben Bernanke 2, The S & P 2, China 1, Michigan 1,
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  PBS    Nightly Business Report    News/Business.   
   (2012) New. (CC) (Stereo)  

    September 14, 2012
    6:30 - 7:00pm PDT  

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>> this is n.b.r. >> susie: good evening. i'm susie gharib. tom is off tonight. shopping for cars, and filling them up at pump. consumers did their share to boost the economy. is the federal reserve doing enough to help "john q public"? how low can they go with promises of ultra low rates for an extra long time, can rates on a 30-year mortgage dip below 3%? >> susie: and the dow loses its cookies. the industrial average drops oreo maker kraft, we'll tell you who's joining the dow 30 now. that and more tonight on "n.b.r."! american consumers are in a cheery mood, surprisingly.
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that's according to fresh data out today. they're feeling hopeful about their economic and job prospects. a new survey from thomson- reuters and the university of michigan shows the consumer sentiment index rose to 79.2 this month. that's the highest level in four months. those surveyed said they are upbeat about their personal finances, and most believe the unemployment will not rise further. also today, the commerce department reported retail sales jumped 0.9% in august. that's the largest increase since february. the gains come as consumers are spending more on cars and gasoline. the report showed that sales at different retailers were mixed and suggested only a modest increase in consumer spending this quarter. today's news comes just a day after the federal reserve stepped in once again to revive the economy, and ben bernanke's promise to help main street. how will main street americans do under q.e.3? joining us to answer that, robert brusca, chief economist at his own firm, fact and
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opinion economics. hi, bob. >> hi, susie. >> susan: all right, so, chairman bernanke says this latest round of stimulus is a-- to quote his words-- a main street policy. is it really? >> well, i think it has the focus on main street. i think the objective is to help main street. but it doesn't really work to help main street first. it's really going to work by trickle down. it's anything to work through wall street. it's going to work through high-income people because the fed just can't lower interest rates much more to have any impact. and the main thing we need to do is broaden the availability of low rates and that takes fiscal policy not monetary policy. >> susan: speak of low rates, they are pretty low. a lot of people might be wondering how are the low rates going to help me? is it going to help me get a house? is it going to help me get a morning? what are your thoughts on that? >> well, basically, interest rates are so low, the banks
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report very interested in underwriting mortgages so they demand very high credit scores and this has the effect of credit rationing. i think that this is a policy that really works through wealthier consumers can gain access to these interest rates and for the most part probably already have refinanced. i don't think interest rates are going to go down much more i'm really worried about the idea what the fed is going to try to do is push up the stock market. to me that's chilling glued gleuz why is that? isn't that a good thing if the stock market goes up? >> weep the stock market to go up because the economy is healthy and not push it up and try to increase spending and pull the economy up. that's artificial. it probably doesn't work and if it works well it probably reverses. it's a dangerous policy and i don't know it's the way monetary policy should be done. >> susan: former fed chairman paul volker said today there is
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unintend consequences that come out of this plan that the fed announced yesterday and said it's dangerous, that there's a risk of inflation. is there a risk of inflation by this new round of quantitative easing? >> mr. volker pointed to the possibility of more inflation down the road. not now. there's a lot of vac in the economy. i think this is a worrisome policy. i think at mr. bernanke's press conference he wasn't very straight forward. the fed has been very forward with wanting to be transparent. i don't think he was transparent. everybody on wall street thinks the fed is going for more inflation and we're all concerned about how much more and what are they going to do to limit it? until the fed speaks to this issue instead of avoiding it-- when asked the question, mr. bernanke said we have a dual mandate and we're concerned with inflation and unemployment, but that gobled the question. the question is, is the fed really willing to tolerate more inflation? if of if so, how much more and for how long? and the fed needs to address
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that in a very transparent way. >> susan: listen, bob, we just have a little bit of time left and i want to ask you about unemployment. the fed said they're trying to create jobs. can the fed solve the unemployment problem? can you give me a 30-second answer on that? >> yeah, well, the 30-second answer is no. there's some evidence that structural unemployment is high, and if so, it's going to make it even hard tore reduce that rate. >> susan: so we're not going to see business hiring a lot more because of the new rounds of qe. >> qe i don't think will do that. the economy may gather some momentum on its own but i don't think qe will have that effect. >> susan: thank you very much. >> reporter: i'm erika miller in new york. coming up, i'll take you back stage to meet nanette lepore, whose designs will soon be coming to a mass market retailer. >> susie: a big change for the dow today as stocks extended their fed rally. kraft foods is being dropped from the dow jones industrial
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average, we'll have more on the changes in a moment. the blue chip average closed at its highest level since december of 2007. the dow rose 53 points, the nasdaq added 28, and the s&p up nearly six. the major averages gained ground for the second week in a row. the dow in with the biggest weekly pop, up over 2%. back to that big change for the dow 30, kraft is out and united healthcare is in, reflecting the growing role of healthcare in the economy. it's the first change to the industrial average's roster in three years. today's move comes as kraft prepares to split its business into two parts. the global snack maker is spinning off its north american grocery brands into a separate publicly traded company. >> we had to do something about kraft. we didn't feel that the two pieces or either piece would be appropriate for the dow jones industrials going forward, so we decided to take the opportunity to make the change. >> susie: united healthcare is the first health insurer in the dow. the change reflects the
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increasing importance of healthcare spending in the u.s. economy. it now accounts for almost 8% of g.d.p. >> healthcare insurance is a big part of the economy, the financial market, and it's a big factor for an awful lot of americans, as well as healthcare costs are clearly a consideration. so we thought healthcare insurance really should be represented in the dow jones industrials. >> there are some other healthcare sector companies in there. they tend to be leading pharmaceutical companies. but insurance wasn't represented. >> susie: the dow's healthcare weighting was nearly 8%. add-in united, and the sector will account for about 10% of the blue-chip index. the change takes effect on september 21.
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>> susie: the rate on the 30- year mortgage notched down a fraction today. you can thank fed chairman ben bernanke for that tiny change. he announced yesterday a plan of buying mortgage-backed bonds with the hope of lowering mortgage rates. but interest rates on mortgages are already the lowest they've been in generations. so many economists wonder how much lower they can actually go. sylvia hall reports. >> reporter: the all-time record low for a 30-year mortgage is 3.49%. the federal reserve is looking to break that record. >> bernanke is doing the right thing to get mortgage rates even lower, even though it's already looking like black magic that he's already gotten it down as low as it is. >> reporter: acclaimed housing economist robert shiller walked us through the math. right now, the 30-year fixed-
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rate mortgage is near 3.5%, and the 15-year mortgage sits just above 2.8%. that's extremely close to 2.3%, the rate of inflation that's expected over the next ten years. inflation rates act as a sort of floor. subtract it from a mortgage rate, and you get the real mortgage rate, or what you'll really pay over time. that means a mortgage rate close to inflation is astonishingly low. >> it's conceivable that the real mortgage rate could actually hit zero. its... at the 15-year level, it's already at 0.5%. economic theory doesn't even say you can't have negative real rates. it's happened. it's kind of hard to believe for mortgages, but it reflects the very unusual environment that we're in right now. >> reporter: even so, economists say rates probably don't have much more room to fall. >> i don't see any more meaningful decline from this point onward. in fact, there may be some higher mortgage rates coming around next year, if the
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quantitative easing leads to somewhat higher inflation rates. >> reporter: but what will it all mean for the housing market? maybe not much. industry insiders say mortgage rates aren't holding back the housing market. the problem is access to credit. many buyers who may want a house can't get financing. >> the latest round, i would say, would have very little noticeable impact on the housing market because rates have already been very low and it's not enticing any additional buyers. what will be the game changer for housing is relaxing some of the underwriting standards that is just overly stringent today. >> reporter: the realtors' lawrence yun says right now, fewer home buyers are defaulting than in years past. he hopes lenders will loosen their mortgage standards and let more people start buying homes. sylvia hall, "nightly business report," washington. >> susie: apple closed the week on two high notes. its stock hit an all-time high today: $691 a share. and a u.s. trade judge said the company didn't violate samsung patents in making its ipod
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touch, ipad, and iphone. with so much sweet news juicing up apple, it's no wonder investors are gobbling up apple shares. but are investors taking too big a bite of apple? diane eastabrook reports. >> with stoke neither $700 a share, it's no apple is the apple of the investment world's eye. according to "morning star" the maker of iphones and ipads is held in more than 5,000 mutual funds, closed end funds, and exchange traded funds. among the largest holders, fidelity contrafund, vanguard total stock market index, and power shares qqq. that means if you don't own apple outright, your 401(k) probably does. so how much of apple can be too much of a good thing? shannon zimmerman, "morning star's" associate director of fund analysis says that depends on your risk tolerance. >> it's a different way of thinking about it, certainly in the world of mutual funds,
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compare your exposure to a company-- apple in this case-- to the exposure that is a relevant benchmark since as the s & p 500 has. >> apple stock comprises 5% of the s & p 500, about 13% of the nasdaq, and about 9% of the russell 1,000 growth index. still, with apple stock on a tear, some investors might be getting jittery are a correction. zimmerman doesn't think the current price is out of line with the company's earnings and its prospects for the foreseeable future. >> if you look at forward earnings, what the company is trading at relative to what anists expect it to do over the next 12 months, it's moderately priced. >> the newly released iphone 5 appears to be selling out, zimmerman says a technology company like apple always has to be on the lookout for the next big competitor. that could prompt some investors to dump the stock and others to rebalance portfolios.
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>> susie: the federal reserve's aggressive plan to stimulate the economy helped drive stocks higher again today. and, equities have been rallying for four straight months. that's thanks to central banks around the globe keeping interest rates historically low. today, the s&p 500 touched a new five-year high on heavy volume. although it pulled back later in the session. that's not the only bullish news. bank of america's new year-end target for the s&p 500 is 1600. that would be a gain of about nine percent from current levels. it would also be an all-time high for the index. bank of america says rising corporate profits should help push stocks higher. speaking of all time highs,
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there were several noteworthy milestones today. in addition to apple, the russell 2000 index of small caps hit a record, and so did shares of exxon mobil. but there was no iphone love for a.t.&t. and verzon. both tumbled more than 2%. yes, pre-orders for the iphone 5 sold out in under an hour, but profit margins are thin on those devices. so investors worry earnings of wireless carriers could suffer short-term. material stocks led the market higher today, on the back of rising commodity prices. freeport-mcmoran, alcoa, and newmont mining all gained at least 2%. home depot shares gained 2% to $59.46. the world's largest home improvement chain is closing all seven of its big-box stores in china. instead, the company plans to attract chinese customers though web sales, as well as specialty stores. shares of staples tacked on 2% after fortune magazine reported several private equity fms,
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including bain capital, are considering a buyout offer for the retailer. but check out the jump in shares of rival office max, up nearly 15%. it expects a pre-tax gain in quarterly earnings, thanks to a settlement with lehman brothers over a debt offering. a rough landing for shares of spirit airlines. the stock fell over 15% after the company warned a key revenue figure would fall this year. the carrier predicts a fall of as much as 4% in revenue per available seat mile. that's how much it costs to fly a passenger a single mile. shares of doctor pepper fizzled; blame it on new data from nielsen showing a drop in monthly u.s. beverage sales. dr. pepper snapple group fell almost 3%, far more than coca- cola and pepsico shares, which were basically flat. meanwhile, oil futures briefly topped $100 a barrel, the first time in four months. crude prices ended the day at $99, with a $.60 gain, pushed higher by the fed's action thursday, as well as continued unrest in the middle east and north africa. as for the most active exchange
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traded funds and notes, the i- path s&p 500 short-term exchange traded note was the big gainer, up 3.5%. and that's tonight's "market focus." >> susie: our market monitor guest tonight says he is expecting a bear market in the next two to three years. he's randall eley, president of the edgar lomax company. so, randal, bear market? why so gleam? >> i actually don't consider it as much gloomy as just facing reality. i heard one of your earlier guests talking about the fact that the federal reserve has
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done a sort amount of quantitative easing, but we really need-- we need fiscal policies to now begin to take on a part of the lode. when that happens, whether it's the fiscal cliff that we've all had described to us repeatedly in the news recently, or whether there's some modified package which i expect, the fact of life is, the federal government is not going to be able to, nor will it, continue to run current annual deficits of $1.25 to $1 eventth.5 trillion. >> susan: you say there are still places investors can park their money and do well, and eats go over what some of them are. all of your stock picks tonight are big caps. chevron, board, why did you like this one? >> they have an oil company so they have a product. there's no issue whether or not it will be bought and used. it also has a very strong balance sheet and a history of
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running profitably. good yelzs, over 3%. and remember, the market with 10-year treasury at this point, is just a little bit under 1.9%. >> susan: and this is a stock to own whether oil prices are going to be up or down. we were just reporting they are close to $100, but if they pull back, chevron is still good in your view? >> absolutely. the management has the ability to make adjustments in order to maintain profit margins. >> susan: okay, let's move along. you have travelers, t.r.v.. what's the attraction with this one? >> if you notice, it's the only financial on the list. we're generally concerned about leverage with banks and investment banks, but this is a company with a strong balance sheet, and in an economy as large as ourselves, you're going to have to maintain a healthy financial segment. travelers has been repeatedly profitable, and they're selling at a p/e ratio of only 12.
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with no growth, you're looking at earnings on your investment over the next five to 10 years of 8% to 8.5% a year. and we think the earnings can grow. >> susan: you also like the earnings prospects for your next stock pick, 3m, and it also has a big dividend. tell us more about 3m. >> 3m's valuation is a little bit higher than we normally buy way p/e of 15 and dividend yield of about 2.5. but this is a diversified manufacturer and even though many people think the u.s. economy is becoming almost completely a service economy, we don't go with that view. the fact is we're going to have to have manufacturing expheapg they've done a good job i think will continue to do so. >> susan: and your last stock that you're recommending is wal-mart. this is a company that every knows in terms of shopping at the stores, but why should you own the stock? umc on the big board. >> that's right. this point, to some degree, we almost don't have to explain. when the economy is doing well,
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americans purchase. and wal-mart has done well. but also when the economy has been under pressure, as we saw back in 2008 and 2009, wal-mart has shown the ability to actually grows revenues. that's a little bit unusual, but it gives us great comfortable and it also has a strong balance sheet. >> susan: now, i want to ask you, randall, these four stock recommendations, are these stocks that if people go out and buy these on monday, that they can hold them for a while? because you're talking about, you know, risks in the economy and in the stock market. are these buy and hold? yes, they are. and remember remember, when i talk about risk in the commercial i'm talkin talking at intermediate term. growth is a concept that only has meaning over the long term. human nature is such that we must do base building. the united states is simply about to go through a period where we must repair our balance sheet. >> susan: any diskrorses to make on the stacks. >> we own everything we recommend or are in the process of buying. >> susan: another that's
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great. thank so much randall. randall ely, of the edgar j. lomack company. >> susie: fashion week has been taking place in new york city this week. the shows are invitation-only, and give celebrities and fashion writers the first glimpse of a designer's newest collection. nanette lepore was one of the nearly 100 designers featured at the event. if you don't know who she is, you could soon be seeing her name in a well-known, national department store chain. erika miller reports from the runway. >> reporter: the colors are bright, the prints bold, the fabrics soft and delicate. designer nanette lepore says the inspiration for her latest collection came from a vase. >> i was inspired by the porcelain room at the charlottenburg palace in berlin. some of the dresses toward the end of the show just look like they are made of glass because of the organza and the nylon takes the dye and the color, and it's just really fun to work with.
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>> reporter: in the world of high fashion, lepore's clothing line is relatively affordable. dresses typically range between $300 and $400 a piece. but soon, shoppers on a budget will be able to buy nanete lepore fashions. a new lower-priced line will be rolled out at j.c. penney stores starting in february. it's a juniors collection called l'amour nanette lepore. it will include dresses, tees, and denim, with most items priced between $30 and $60. lepore says her daughter violet is her muse. >> it's going to have my sort of fun, playfulness, mixed-up approach to the way we want to dress, but really made toward the junior market. >> reporter: partnering with j.c. penney will help lepore broaden the appeal of her brand. and it could also help the struggling chain spruce up its dowdy image. j.c. penney is in the process of transforming itself from a traditional department store into a group of stores within a store. so lepore's boutique, along with others from levis, liz claiborne, and arizona jeans, could help lure away business from internet retailers.
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>> the only way to do it is to make the stores visually different, where you know what? you enjoy the experience so much, you found what you wanted, you don't need to go to an amazon. you don't need to go on a macy's online. you are going to go to j.c. penney for that item. >> reporter: but sozzi warns the strategy is risky, and success will depend on more than just offering the right merchandise >> the service is key, in order to sell a whole outfit, and they have to do that at j.c. penney, because they are investing so much now up front, you have to have the hand-holding. as soon as that customer comes in the door, an associate has to make eye contact with them, ask them what they want to buy, up- sell them... and i don't see that in the store yet. >> reporter: part of what distinguishes lepore from other designers is nearly all of her high end line is made in manhattan. but that won't be the case with l'amour. will the fashions be made in the usa? >> some of them will be. not like mine. on my runway there's only maybe two or three pieces that won't be made in america. >> reporter: but no matter where the clothing is made, fans will surely check out her new line.
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erika miller, "nightly business report," new york. >> susie: next week on "n.b.r." we take a week-long look at the national debt, how big is it, and what options does the u.s. have for dealing with it? we also head to hershey, pennsylvania for an update from the chocolate maker's c.e.o. and we tackle gold mining stocks. the street.com's joe deaux joins for a look at where mining shares are headed. and finally, how will you or your company be remembered? tonight, lou's been thinking about leaving a mark. here's author and educator lou heckler. >> to this day, it's one of the most accidentally provocative questions i've ever been asked. when my grandmother died many, many years ago, our son was quite young and he asked, when great grandma died, did she leave a mark? i think my wife and i fumbled with some answer at the time, satisfying neither steve nor us. it was only years later that he told us the source of the question: he had seen one of those old cops-and-robbers films
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on tv and when a body was found, one of the cops drew around it with chalk. he had seen some chalk on my grandmothers basement floor and wondered if that was her mark! i laugh about it now, but it also gets me thinking about the deeper meaning of leaving a mark. at some way-deep-down level we all want to do that, don't we? in a social group one evening, we played this after-dinner game: when you're gone, what word or words would you like people to use in describing you? i said loyal. others said creative or willing to help; things like that. i like these two: teddy roosevelt said, courtesy is as much a mark for a gentleman as courage. charles eastman, who helped found the boy scouts of america, said, "to have a friend, and to be true under any and all trials, is the mark of a man." there's no question that each of us will leave a mark, and it may not even be the one we think were leaving. i'm lou heckler. >> susie: that's nightly business report for friday, september 14. have a great weekend everyone,
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and thanks for watching. we'll see you online at: www.nbr.com and back here monday night. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org >> join us anytime at nbr.com. there, you'll find full episodes of the program, complete show transcripts and all the market stats. also follows us on our facebook page at bizrpt. and on twitter @bizrpt.
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